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Ex-hedge fund trader settles SEC civil charges

Former hedge fund trader Danielle Chiesi on Wednesday agreed to pay USD $540,000 to settle a civil charge with the Securities and Exchange Commission (SEC) [official website]. Chiesi was accused of communicating non-public information about IBM Corporation, Advanced Microdevices (AMD) and Sun Microsystems (now Sun-Oracle) [corporate websites] in 2008 and 2009 to her superiors at New Castle Funds LLC [fund profile], a Manhattan-based investment advisory company formerly part of Bear Stearns [NYT backgrounder]. Chiesi was arrested in 2009 along with Galleon Group founder Raj Rajaratnam [JURIST news archive] and accused of using the information to reap more than $4 million in illegal profits for New Castle. The settlement Chiesi agreed to pay amounted to a large portion of her net worth [WSJ report], including salary and bonuses she received during the conspiracy activity. She pleaded guilty [JURIST report] in January to three criminal counts of conspiracy to commit securities fraud before judge Richard Holwell of the US District Court for the Southern District of New York [official website]. Chiesi faces over three years in prison for the criminal charges when she is sentenced on July 20 in federal court.

A federal jury convicted [JURIST report] Rajaratnam in May on all 14 counts of insider trading. New Castle is said to have gained at least $1.7 million from the trades. Chiesi reportedly got the information from former IBM executive Robert Moffat, with whom she was having an affair. Moffat is currently serving six months in prison for insider trading in connection with the Galleon case. Moffat was sentenced [JURIST report] in September 2010 and ordered to pay a $50,000 fine for his role in the scheme after he pleaded guilty [JURIST report] the previous March. Former Intel Capital [corporate website] executive Rajiv Goel pleaded guilty [JURIST report] to insider trading charges in connection with the Galleon probe earlier in February 2010. Rajaratnam, Chiesi, Goel and Moffat were arrested in October and charged [complaint, PDF] along with two other individuals and two business entities with insider trading. The complaint alleged that the individuals provided Galleon Group and another hedge fund with material non-public information about several corporations upon which the funds traded, generating $25 million in illicit gain. Rajaratnam and Chiesi initially pleaded not guilty [JURIST report] in December 2009 after being indicted for insider trading.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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